Tom James provides economic recovery outlook listen04/28/09 Seán Kinane
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Who is to blame for the current global recession? CEO and chair of Raymond James Financial Tom James spread the responsibility around this afternoon at the Feather Sound Country Club in a meeting of the Suncoast Tiger Bay Club.
James laid responsibility for the recession on banks that issued sub-prime loans, individuals who took the loans, and former Federal Reserve Chairman Alan Greenspan among others.
In October, the federal government passed a $700 billion bailout of the country’s banks through the Troubled Asset Relief Program (TARP). James credits the TARP with saving the economy from an even worse disaster, because the country was “this close to having a failure of the banking system in the United States, a failure of the financial system in the world. So if you wonder why the government stepped in and propped up the banks, they had no choice. If the banking system fails, not only can’t you get lending, you can’t get your deposits back out of there. And if the government reprints all that money, guess what happens? The value of, the purchasing power of, those looks like pre- and post-war Germany.”
In contrast, James does not support an equally expensive federal stimulus bill meant to create jobs and infrastructure -- the American Recovery and Reinvestment Act.
James says that many companies made gambles and took risks without weighing the consequences. For example, he cited the $65 billion in losses by Merrill Lynch --the financial services firm that was acquired by Bank of America last year: “bad management, lax management, too-optimistic management, not dishonest management. This is not [Bernie] Madoff.”
Regardless of who created the current financial mess, James says that while the U.S. may have seen the worst of the stock market, the recovery could take a long time and could be painful.
“I think there’s no doubt that when we come out the other side of this [recession] that we’re facing substantial inflation. … We could have stagflation, which is still worse, where business is not growing very rapidly and prices are going up.”
A member of the audience, Joan Deguire thinks that if the state of Florida is to emerge from the recession, it will have to be based on a different model than the past. She says overdevelopment is “destroying the state.”
Members of Florida’s Senate and House are trying to reconcile the state’s budget, based in part on the federal stimulus funds that Tom James decried. Suncoast Tiger Bay Club member Dave Coale thinks that to avoid the same budget issues every year, Florida needs additional revenue sources.
“I think we need to consider an income tax.”
An anonymous Tiger Bay member emphasizes personal economic responsibility based on the experiences he and his wife had while growing up during the Great Depression of the 1930s.
The next Suncoast Tiger Bay Club meeting will feature Florida’s Attorney General Bill McCollum on May 7 at the Feather Sound Country Club.